Budgets Flashcards
1
Q
What is a budget?
A
It’s an estimate of income or expenditure for a set period of time
2
Q
What are the types of budget?
A
- zero based budget
- historical budgets
3
Q
How is profit budget constructed?
A
1) analyse market
2) draw up sales budget
3) draw up cost budget
4
Q
What is a variance and what are the causes?
A
arises when there is a difference between actual and budget figures
Causes:
- stronger demand
- selling price increases
- competition weaker
- sales forecast overoptimistic
5
Q
Cons of budgeting?
A
- don’t work when business are dynamic (changes)
- time consuming to prepare
- unrealistic budgets can be demotivating
-managers can become short time and short sighted
6
Q
What is historical budget?
A
based on historical data
7
Q
What are zero based budget?
A
using figures based on potential performance
